Just over three years ago on January 7 2015 the Australian share market welcomed Appen Ltd (ASX: APX) shares to its boards following its successful initial public offering (IPO).
The provider of language technology data and services raised $15 million at an offer price of 50 cents per share, giving it an indicative market capitalisation of $47.3 million.
At the time, it advised prospective investors that it aimed to "take advantage of, and grow with, the recent acceleration of devices and technology that interact with humans on human terms and advances in mobile communications and social media that are driving unified communication in any language and across languages."
I think it is safe to say that it has achieved this. Thanks to the accelerating AI market and the high and growing demand for quality training data, Appen recently announced its full year results and blew the market away.
In FY 2018 Appen posted a massive 119% increase in revenue to $364.3 million, underlying EBITDA growth of 153% to $71.3 million, and a 148% lift in net profit after tax to $49 million.
This means that in the space of just three years, the company is now generating more profit than its market value upon listing.
Unsurprisingly, this has led to its shares rising incredibly strongly over the last three years. On Tuesday the Appen share price closed the day at $23.49, giving it a market capitalisation of approximately $2.8 billion.
To put this into context, this means that a $10,000 investment in Appen's shares at its IPO would have grown to be worth a staggering $470,000 today.
I believe this demonstrates how rewarding it can be to invest in small cap shares with quality business models, strong growth potential, and talented management teams.
Though, it is worth remembering that very few small cap tech shares will be as successful as Appen and many will fail to live up to expectations.
But two that I'm keeping a close eye on in 2019 and beyond are software company Livetiles Ltd (ASX: LVT) and network as a service provider Megaport Ltd (ASX: MP1). I believe both have a lot of potential and are deserving of a spot on most watchlists.
